Opening day at the new Four Seasons Hotel in Toronto’s Yorkville neighbourhood on Oct. 5. In the past year, four luxury hotels have opened in Toronto offering customized treatment starting at around $500 a night. (Fernando Morales/The Globe and Mail)

Opening day at the new Four Seasons Hotel in Toronto’s Yorkville neighbourhood on Oct. 5. In the past year, four luxury hotels have opened in Toronto offering customized treatment starting at around $500 a night.(Fernando Morales/The Globe and Mail)

If there were such a thing as a bull market in the luxury hotel sector, Toronto would be smack in the middle of the mother of all rallies.

In the past year alone, four luxury hotels – a new Four Seasons, the Shangri-La, the Trump Hotel and the Ritz-Carlton – have opened their doors and welcomed visitors to Canada's largest city. All have room rates starting at about $500 per night, according to their websites.

The most recent to open, the 259-room Four Seasons in the heart of the city’s posh Yorkville neighbourhood, marked the renewal of an iconic Canadian brand in its hometown. It also heralded the entry of celebrity chef Daniel Boulud onto the Great White North’s Michelin-star-deprived culinary scene.

This for a city that, prior to this recent development boom – and with the exception of a handful of high-end boutique hotels – lacked any true five-star accommodations.

“I think Toronto has been underserviced from a luxury hotel standpoint for years,” says Bill Stone, executive vice-president with real estate consultancy CBRE Hotels. “There have been hotels like the Windsor Arms or Hazelton, but they weren’t enough to service demand.”

Toronto isn’t Canada’s only city to experience a recent luxury lodgings boom. Vancouver has seen the addition of three new high-end properties since 2009, including a Shangri-La hotel, the Fairmont Pacific Rim Hotel and the Rosewood Hotel Georgia.

But this flurry in five-star development begs a critical question: With the global economic recovery advancing at a snail’s pace and uncertainty hampering the spending plans of everyone from wealthier leisure travellers to major corporations, just how many high-priced hotel rooms can cities such as Toronto and Vancouver absorb?

David Larone, Toronto-based director of hospitality consulting firm PKF Consulting Inc., points to average daily rates rather than room count as the key metric to watch in predicting the potential success of this new round of development. He notes that in Toronto, the four new five-star properties have added slightly fewer than 1,000 rooms to the city's approximately 17,000-room downtown hotel supply. That may seem like a lot until taking into account the closure of the old Four Seasons and the one-time celebrity magnet Sutton Place, hotels which combined housed more than 700 rooms. (Both of those properties are being converted into condos.)

“The number of rooms by themselves is not a big deal,” Mr. Larone says. “The question is, ‘Can you absorb this many hotel rooms coming in at one time at the upper end of the market?’”

His conclusion: Toronto and Vancouver are not only able to absorb this new luxury supply, but they will continue to attract both the leisure and corporate clientele needed to sustain and grow the business over the long term.

Mr. Larone predicts that as these new properties trudge through the typical five-year ramp-up period that any luxury hotel faces en route to solidifying its clientele, occupancy rates will hover in the low 60-per-cent range before strengthening to about 68 per cent by 2017. The average annual occupancy rate for a hotel in Toronto typically hovers at about 73 per cent, he says.

Interestingly, discerning lodgers may not have had the chance to indulge in Toronto and Vancouver's new five-star offerings if not for the cities’ recent condo booms. Nearly every one of the new luxury hotels in these cities has an attached condominium component.

Monique Rosszell, Toronto-based senior vice-president with HVS Global Hospitality Services, explains that marrying luxury condos with chic hotel brands is part of the new economic reality for high-end hotel developers.

“The hotels would not be feasible on their own,” she says. “The cost to build is too high, so obviously they’re subsidized by the condos. But from a day-to-day operational standpoint, the condos benefit from having the hotel.”

How? Beyond having a name such as Four Seasons or Ritz-Carlton attached to their property, condo owners often enjoy posh privileges such as room service, sharing of amenities such as pools and gyms, while also having access to the hotels’ high-end retail and restaurant components.

The hotel brand and amenities attract condo buyers, and in turn those buyers offset the massive capital costs of building the kind of hotel able to command room rates that can easily top $1,000 per night for larger suites.

Ms. Rosszell points out that true hotel opulence nowadays extends beyond simply boasting pristine interiors, offering state-of-the-art, in-room technology or providing attentive concierge services – although they're all must-haves. Luxury hotels must now offer fine dining such as Mr. Boulud’s new café at the Four Seasons in Toronto or Market, the restaurant operated by renowned chef Jean-Georges Vongerichten at the Shangri-La in Vancouver.

Then there are the amenities. Take the in-house spa, for example. Having a soothing space to properly pamper guests is the new mint on the pillow – and a priority for five-star consideration, according to Ms. Rosszell.

But even as guests’ preferred amenities change with the times, one critical aspect of running a successful luxury hotel remains the same: the need to provide attentive, even obsessive, levels of service.

It’s a reality that’s top of mind for Dimitrios Zarikos, regional vice-president and general manager at the Four Seasons in Toronto.

“We have to deliver the service or we are doomed. It’s always about service because the other hotels have beautiful products, as well. We have to stand out to do better than everybody else.”

New luxury haunts

Looking for luxury lodgings in Toronto or Vancouver? Due to a recent development boom, there are more options:

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